Illustration: Jayachandran/Mint
Illustration: Jayachandran/Mint

Innovation is the best counter to digital piracy

Using a law enforcement approach as a primary tactic is doomed to failure

One of the latest casualties in the war on digital piracy is a high-profile one. KickAss Torrents (KAT), the world’s largest torrenting site, was shut down recently by the US government under the aegis of the Digital Millennium Copyright Act. Its founder Artem Vaulim was arrested in Poland and KAT servers are being taken down around the world. The authorities will most likely win this battle. But these are not the most effective tactics in the longer war.

Before KAT, Pirate Bay—another torrent site—ruled the roost. When it was taken down, KAT stepped up, just as another website will replace KAT. It’s the same with file-sharing sites where content infringing copyright can be uploaded; Rapidshare and Megaupload were both taken down, only for other sites to mushroom. This has been a pattern over the past decade-and-a-half. And it shows how ineffective this never-ending game of whack-a-mole is. There are three aspects to the issue.

The first is economic logic. Disseminating and consuming material under copyright without due payment to content creators is certainly an ethical wrong. But in practical terms, the effort and resources spent on law enforcement must be commensurate with the economic harm caused by the crime. This is where things get tricky due to a lack of sufficient independent studies or hard numbers.

In the US, for instance, it has been claimed for years by the affected industries that the damage to the economy is to the tune of $200-250 billion and 750,000 jobs. But in 2010, the US Government Accountability Office had issued a report debunking this. In India, a McKinsey report back in 2008, The Effects of Piracy and Counterfeiting on India’s Entertainment Industry, also had a dire prognosis. There too, its methodology—data collated via interviews with industry players and anecdotal evidence from secondary sources—left much to be desired.

Assuming that every download of illegal content is a lost sale as industry bodies do is logically flawed. Much of the content is consumed only because it is free; there would be no corresponding legal transaction if the illegal avenue were closed. And given that digital content essentially has no production cost per copy—or that it is so minuscule beyond a point so as to be irrelevant—nor does the aggregate economy take a hit. The resources that would have been spent on acquiring digital content legally are simply utilized in other economic activity. There can be an overall loss in allocative efficiency coupled with a certain amount of financial loss, but this is qualitatively different from the damage claimed.

The second aspect, measured against this, is the cost and collateral damage of the law enforcement approach. Legislation such as the Stop Online Piracy Act, introduced and then abandoned in the US Congress due to controversy over its provisions, is an example of the danger of overreach. Many websites that facilitate peer-to-peer content distribution are not illegal in themselves; innocent individuals and enterprises are also hurt when such sites are shut down, denying access to services and uploaded data. And there are issues related to freedom of speech—such legislation can be used for online censorship—an excessive burden on content-hosting websites and a stifling of the creative chaos that fosters digital innovation.

That innovation is the third aspect. Over the 15-odd years, digital piracy has, in effect, been a process of consumers nudging content producers and marketers to keep pace with technological evolution. It has led to innovation and content delivery via digital pipelines in a manner consumers want, a hallmark of an effective market, not one dictated by producers. That innovation has led consumers to choose legal avenues over illegal, undercutting piracy.

The popularization of digital music via iTunes can be traced back to the Napster network of the late 1990s, for instance—and the former in turn laid the foundations for streaming services like Pandora, Spotify and Saavn. It’s the same story in the television and movie industries, from digital-only brands such as Netflix to conventional TV channels allowing digital access to their content. Their success shows that consumers are ready to pay for legal content—even when it is available illegally for free—if the price point is right and convenience of access is high.

And there’s the prime lesson. The nature of the medium means stamping out digital piracy by brute force is impossible. Sensible legislation centred around digital rights management coupled with constant evolution in content delivery mechanisms could do a far better job.

Does dealing with digital piracy need a lighter touch? Tell us at views@livemint.com

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